Correlation Between Awilco Drilling and American Vanguard

Can any of the company-specific risk be diversified away by investing in both Awilco Drilling and American Vanguard at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Awilco Drilling and American Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Awilco Drilling PLC and American Vanguard, you can compare the effects of market volatilities on Awilco Drilling and American Vanguard and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Awilco Drilling with a short position of American Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awilco Drilling and American Vanguard.

Diversification Opportunities for Awilco Drilling and American Vanguard

0.34

Correlation Coefficient

Awilco Drilling  American Vanguard

Weak diversification

The 3 months correlation between Awilco and American is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Awilco Drilling PLC and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard and Awilco Drilling is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Awilco Drilling PLC are associated (or correlated) with American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of Awilco Drilling i.e., Awilco Drilling and American Vanguard go up and down completely randomly.

Pair Corralation between Awilco Drilling and American Vanguard

Assuming the 90 days horizon Awilco Drilling PLC is expected to generate 13.33 times more return on investment than American Vanguard. However, Awilco Drilling is 13.33 times more volatile than American Vanguard. It trades about 0.05 of its potential returns per unit of risk. American Vanguard is currently generating about -0.07 per unit of risk. If you would invest  1,000.00  in Awilco Drilling PLC on October 11, 2024 and sell it today you would lose (819.00) from holding Awilco Drilling PLC or give up 81.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Awilco Drilling PLC  vs.  American Vanguard

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

American Vanguard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Vanguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, American Vanguard is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Awilco Drilling and American Vanguard

The main advantage of trading using opposite Awilco Drilling and American Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awilco Drilling position performs unexpectedly, American Vanguard can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Vanguard will offset losses from the drop in American Vanguard's long position.

The idea behind Awilco Drilling PLC and American Vanguard pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.